Nobel-winning economist blasts Carney's Brexit forecasts

Nobel-winning economist blasts Carney's Brexit forecasts

The Brexit forecasts published by the Bank of England last week were based on "ad hoc assumptions" and may be politically motivated, according to Paul Krugman, an economist who won the Nobel Prize for economics.

Mr Krugman, who won the prize for his work on trade theory in economics in 2008, has been a fierce critic of the US and other government’s austerity policies and is currently a professor at New York University.

Commenting in a series of tweets, the economist said the Bank of England’s forecasts around what would happen if the UK left the EU without a deal were based on "ad hoc assumptions" that he "doesn’t understand" and which were made "on the part of people who oppose Brexit for the best of reasons".

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He made it clear he thought Brexit was a bad idea that it would "make people poorer".

Mr Krugman said: "Their bad-case losses from a no-deal Brexit look extremely high".

This was specifically a reference to the 8 per cent decline in GDP within a year of a no deal happening. Mr Krugman said the only time he has ever forecast an economic contraction of that severity was in countries with far deeper problems than the UK.

Mark Carney said the forecasts were "worst case" scenarios, rather than what he actually expected to happen.

Karen Ward, chief market strategist at JP Morgan Asset Management UK said an orderly Brexit outcome was tricky for investors as it would likely lead to a decline in the performance of the overseas earners that make up the bulk of the FTSE 100, but be better for the economy as a whole.